Wall Street received a generous public bailout and quickly recovered. Main Street continues to languish. Politicians and pundits rarely inquire into the reasons for the disparity. Doing so would expose the reality that the United States is ruled as a plutocracy, not a democracy, and would focus citizen anger on the structure of the institutional system that gives Wall Street bankers their power.
The 2008 financial crash was a direct and inevitable consequence of a social engineering experiment conducted by Wall Street interests that allowed Wall Street financial institutions to consolidate their control of the creation and allocation of money beyond the reach of public accountability. The priority of the money system shifted from funding real investment for building community wealth to funding financial games designed solely to enrich Wall Street without the burden of producing anything of real value.
The proper function of money is to facilitate the sustainable and equitable utilization of resources to fulfill the needs of people, communities, and nature. This calls for a community-based and democratically accountable system of money, banking, and finance that functions to create and allocate money as a well-regulated public utility.
Such a system would be remarkably similar to the one that financed the United States’ victory in World War II, produced an unprecedented period of economic stability and prosperity, made America the world’s industrial powerhouse, and created the American middle class—a system that was working well until Wall Street launched its “financial modernization” experiment. Wall Street interests mobilized in the 1970s to advance a host of policy initiatives that led to the erosion of the middle class, an extreme concentration of wealth, a costly financial collapse, high rates of unemployment, bankruptcy, and housing foreclosure, accelerating environmental systems failure, and the hollowing out of U.S. industrial, technological, and research capacity. Wall Street profited all along the way and declared its social engineering experiment a great success.
This report presents a six-part agenda for ending Wall Street’s disastrous experiment and creating a community-based, publicly accountable money and banking system responsive to the needs and opportunities of the United States in the 21st century.
Critics will argue that the proposed actions represent unwarranted governmental interference in the market. In reality, Wall Street institutions are themselves creations of government and would not exist without governmental intervention. Virtually every major Wall Street financial institution is a corporation created by a government-issued charter extending rights and privileges not available to an individual. The money that fuels Wall Street’s speculative frenzies originates with the Federal Reserve, a creation of government. Most Wall Street corporations would have gone out of business in the financial crash of 2008 if not for a massive bailout from the U.S. Treasury and the Federal Reserve.
It is fully appropriate, indeed mandatory, for government to intervene to hold to account institutions it bears responsibility for creating and securing against their own folly. The Federal government’s practice of creating, subsidizing, and protecting private institutions that serve no valid public purpose and refuse to accept responsibility for the public consequences of their actions must end.
Leadership in implementing the proposed agenda will depend on citizens acting in concert with their state and local governments to advance public understanding of the issues raised here, moving their business from Wall Street to Main Street financial institutions, promoting cooperative or nonprofit ownership of financial institutions, and advocating implementing legislation.